U.S. charges Chinese army officers with cyberspying

WASHINGTON — The United States has charged five Chinese army hackers with systematic cyberspying that stole trade secrets from six U.S. nuclear, steel and clean-energy companies, directly resulting in “substantial” loss of jobs, competitive edge and markets.

“This is a case alleging economic espionage by members of the Chinese military … to advantage state-owned companies and other interests in China,” U.S. Attorney General Eric Holder said at a press conference. “It represents the first ever charges against known state actors for infiltrating United States commercial targets by cyber means. The range of trade secrets and other sensitive business information stolen in this case is significant and demands an aggressive response.”

Given that diplomacy has failed to stop Chinese hacking, he said, the charges reflect a new and harsh response to any hackers in any country that tries to steal commercial secrets from U.S. companies.

“This Administration will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market.” he said.

FBI Director James Comey said the Chinese government has “blatantly sought to use cyber espionage to obtain economic advantage for its state-owned industries.”

The five charged hackers — Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu, and Gu Chunhui — are officers in Unit 61398 of the Third Department of the Chinese People’s Liberation Army (PLA), the indictment reads. They worked out of a Chinese People’s Army building in Shanghai.

The targeted companies are Westinghouse Electric Co., U.S. subsidiaries of the German company SolarWorld AG, United States Steel Corp., Allegheny Technologies Inc. (ATI), the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) and Alcoa Inc., the indictment states.

David Hickton, U.S. attorney for the western District of Pennsylvania where the charges were laid, said the hackers targeted the companies at a critical time when they were in trade disputes with China and when they were competing with Chinese companies in international markets.

When Westinghouse, for example, in 2010 was building four nuclear power plants in China and negotiating other terms alleged hacker Sun “stole confidential and proprietary technical and design specifications for pipes, pipe supports, and pipe routing” as well a sensitive emails, the indictment alleges.

The U.S. also alleged that when Chinese companies were dumping solar energy equipment in the U.S., the hackers stole information about SolarWorld’s “cash flow, manufacturing metrics, production line information, costs, and privileged attorney-client communications relating to ongoing trade litigation.” The indictment adds that “such information would have enabled a Chinese competitor to target SolarWorld’s business operations aggressively from a variety of angles.”

The defendants are charged with 31 counts of conspiracy, fraud, computer hacking, transferring computer codes to damage a protected computer, theft of trade secrets and economic espionage occurring between 2006 and 2014. If convicted, the defendants face up to life in prison.

But the U.S. will find it difficult to arrest the defendants because it has no extradition treaty with China.

Responding to questions, Holder said the administration has other means to convince the Chinese to turn over the defendants, but he would not elaborate.

“State actors engaged in cyber espionage for economic advantage are not immune from the law just because they hack under the shadow of their country’s flag,” said John Carlin, Assistant Attorney General for National Security.

The Chinese government last year responded to allegations of commercial cyberspying linked to People’s Army Unite 61398 hackers by demanding the U.S. produce proof.

“Now we have,” Carlin said. “For the first time we are exposing the faces and names behind the hackers.”

According to a 2013 report by the U.S. security firm Mandiant, Unit 61398 has also targeted Canadian companies.

U.S. President Barack Obama has made Chinese cyberspying a major issue in his second term. The National Security Agency created a prosecution division in the FBI to chase countries that hack into U.S. companies’ systems. But after whistleblower Edward Snowden, a former NSA contractor, revealed the global extent of U.S. cyberspying and alleged that the U.S. spies on China, Obama suddenly stopped talking about Chinese spying.

Bob Anderson, executive assistant director FBI, said the indictment “clears the way for additional charges.” He added, “This is the new normal. This is what you are going to see in the years ahead … We are going to hold you accountable no matter what country you live in.”

Various national intelligence estimates claim Chinese cyber-espionage has cost the U.S. up to $120 billion US.

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